On Hospice Operations Under Medicare Reimbursement Policies

Barış Ata (), Bradley L. Killaly (), Tava Lennon Olsen () and Rodney P. Parker ()
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Barış Ata: Northwestern University, Evanston, Illinois 60208
Bradley L. Killaly: Emory University, Atlanta, Georgia 30322
Tava Lennon Olsen: University of Auckland, Auckland 1142, New Zealand
Rodney P. Parker: University of Chicago, Chicago, Illinois 60637

Management Science, 2013, vol. 59, issue 5, 1027-1044

Abstract: This paper analyzes the United States Medicare hospice reimbursement policy. The existing policy consists of a daily payment for each patient under care with a global cap of revenues accrued during the Medicare year, which increases with each newly admitted patient. We investigate the hospice's expected profit and provide reasons for a spate of recent provider bankruptcies related to the reimbursement policy; recommendations to alleviate these problems are given. We also analyze a hospice's incentives for patient management, finding several unintended consequences of the Medicare reimbursement policy. Specifically, a hospice may seek short-lived patients (such as cancer patients) over patients with longer expected lengths of stay. The effort with which hospices seek out, or recruit, such patients will vary during the year. Furthermore, the effort they apply to actively discharge a patient whose condition has stabilized may also depend on the time of year. These phenomena are unintended and undesirable but are a direct consequence of the Medicare reimbursement policy. We propose an alternative reimbursement policy to ameliorate these shortcomings. This paper was accepted by Christian Terwiesch, operations management.

Keywords: healthcare; government; regulations; fluid analysis; simulation (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:59:y:2013:i:5:p:1027-1044

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